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The $100 MBA Show
MBA2546 Q&A Wednesday: How do I stop losing customers? My churn is too high!
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Hey everyone, welcome back to the $100 MBA Show. I'm your host Omar Zinholm and today's episode is a Q and A Wednesday episode where I answer a question from one of you, one of our listeners, one of our viewers, subscribers. If you have a question you want to ask, just go to 100- MBA-NET Q submitted there and we'll answer right here on Q and A Wednesday. Today's question is from Fabian and Fabian asks how do losing customers? My churn is too high. It's out of control. This is a fantastic question and I'll tell you why. If you don't get your churn in check, you will go out of business. This is just a reality. There is something called the churn line where basically you just can't outgrow churn. You're going to hit a ceiling and basically you have a leaky bucket where every time we bring in new customers, they leak out the bottom through churn. Churn basically means losing customers every month, every year, whatever it might be. So we're going to solve this. We're going to make sure we don't lose any more customers than we need. There's always going to be some level of churn, but we want to make sure it's low as possible. So we're going to talk about how to go about this, how to make sure that we are being deliberate about keeping our customers happy, keeping them paying and keeping them month over month, year after year. This is how impactful getting your churn in control and increasing your retention. If you increase your customer retention by 5%, it can boost profits between 25 and 95%. That's according to a research from Brain and Company. And this is so important because you want to keep as much money as you can when you're in business. So if you can increase your profits by 25 to 95%. Yes, please. Right, let's get into it. Let's figure out how to do that to make sure your customers keep coming back and keep paying you money. The first step in all this is knowing where you stand, where your churn retention is. By the way, churn and retention are opposites, right? Churn is the rate of customers that are leaving. Retention is the rate of customers that are staying. Right. So if your churn rate is high, you need to know exactly how high and where the problem lies. You need to understand what you're working with. Too many entrepreneurs, especially new entrepreneurs, don't know their numbers. And churn is one of those numbers you should know. You need to understand where you stand. Are you at 10%, 15%? Where is that number? So that you can know where you're working from and see if you're decreasing your churn. You're going to see if your efforts are paying off. You also want to understand why they're churning, right? What's going on? What's the point where they're actually leaving you? And this is something that is so important, and it's actually pretty easy to find out. Okay, I'm going to show you how you can use a simple tool to do this. But a lot of people just neglect the fact that they don't know their numbers. Right? You need to get visibility. What gets measured gets managed. That's what Peter Drucker says, and I believe it. For example, you need to understand, are your customers canceling after the first month, after six months? What is the pattern? And you want to narrow that down. And later it's going to get even more sophisticated. You're going to segment your customers into groups, and some groups are going to turn out, you know, down the line, some people turn out early. And you're going to cater to each group differently. But right now, when we're getting started, we just need to understand the average. What percentage of your customers are leaving you at this point, this point, this point, so you can understand the pattern and see what needs fixing. A good example of this, let's say, for example, your customers are leaving after the trial or after the first billing cycle. Okay? This can mean your onboarding process needs work. It's not strong enough. It's not getting people to activations not getting them a win quickly enough for them to see the value of your product. So by working on this, you're going to be able to lower your churn dramatically because they're not going to be leaving you in the first few weeks or months. I'm speaking out of experience here. We had a churn problem at Webinar Ninja, my software company, when I was building and growing it for 10 years before we exited that business. And the way we did this is we looked at our churn. We found out that people are actually leaving us early on in the first week or two or three or months. And we focused on our onboarding. We focused on getting more information about our customers when they get started. We created this whole onboarding experience where we did this demo webinar, and we actually created their first webinar for them so they can jump into there and test things out in the studio and the camera and all that kind of stuff. So that dramatically changed our business. Our business went from, like, barely kind of going along and making a profit to exploding because we handled our churn problem and realized what was happening in the beginning. How did we find that out? How did we get that information? Well, that goes to our action step. This kind of leads me to the action step I want you to take. You want to start tracking and calculating your churn as regularly as possible. And you could do this with a very easy and free tool. It's called ProfitWell. We use ProfitWell for years. If you go to profitwell.com you can just plug in your payment processor like Stripe, and it will calculate all this information for you. Not just your churn, but all your business metrics like revenue and all that beautiful stuff you need to know so that you know your business is healthy. But you can see exactly when people are leaving, what percentage of your customers are leaving when inside. Prof. So it's all done for you automatically. So step one was getting visibility on our numbers. Step two, create a cancellation flow. What's a cancellation flow? Well, when your customers cancel your product or service, you need to understand why. There's got to be a system, a process where you learn why when it happens. So this could be high tech, where it happens inside your website or your app and you ask a bunch of questions like we did with our software. Or this could be manual. You ask people to email you and you ask them questions while you're in the cancellation process, when you're going back and forth with a customer or getting on a call with them or whatever it might be. But you can't improve what you don't understand. That's the bottom line. You can't improve what you don't understand. So when a customer cancel, it's crucial to capture that feedback on why they're leaving. And creating a simple cancellation survey gives your team insights that are gonna help them move the ball forward. For example, with Webinar Ninja, our webinar software, what we did is we gave them categories when they canceled. We said, are you canceling because of price? Are you canceling because of a missing feature? Are you canceling because you are not using using it? There's a whole bunch of choices we gave them and we changed those choices a few times to kind of test things out. But basically we made it easy with some radio buttons to understand why. In this next step, we gave them a chance to elaborate on that point. And often after they canceled, we reached out to them on email or we asked them to get on a call and we just wanted to learn how we can improve if there's a missing feature. Sometimes they said there's a missing feature that we had. Right? But that tells us that they don't know we have it. We need to show our features in a better way way, whether it's in our tutorials or in our onboarding or our help articles or whatever it might be. The point here is that they think we don't have a feature that we have, that's a problem. So getting on a call also works, like I mentioned, extracting the information of why they cancel so that you can improve that whole system in your business. You can plug up that hole in that leaky bucket so that more customers don't leave for that reason. Right? So this is gold. This information is absolute gold. So you should have some form of cancellation process to gather information. The easiest, fastest way to do this. If you want to implement this right away and you don't want to code something or have something super deluxe on your website or your app is have an automation use something like Zapier or something where when a customer cancels, you automatically send them an email with a survey. And you can create a survey with Google forms or tally forms, which is really cool and nice looking. Point here is that you can easily just send them a quick five question survey, find out out why they canceled, gather that data. Not everybody's going to answer the survey, but you will get some people that will answer the survey and that's more than what you have now. So that's the low tech, easy way to do it. Quickly.
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This makes reconciling so easy you'll never have to chase down a receipt again, and your employees will no longer spend hours submitting expense reports. The time you'll save each month on employee expenses will allow you to close your books even faster. RAMP estimates eight times faster. Businesses that use RAMP save an average of 5% the first year and now get $250. When you join RAMP, just go to ramp.commba ramp.commba r amp.commba cards issued by Sutton bank member FDIC terms and conditions apply. Step three is interviewing your best customers. This might sound strange. Why am I interviewing my best customers if I'm worried about people that are leaving me? My best customers are not leaving me. Well, well, you want to find out what do your best customers look like? What's their profile? What are they working on? What are their problems? What's the business they're in? What's their market? What their needs are? Why they like your solution? What are the problems it solves for them. You want to create a profile of your best customers so you can look into your stripe dashboard or whatever payment processor you're looking at and who are your high value customers? Top 10, top 15. We looked at our top 100 customers and thought, oh, let's talk to each one of these people and find out what they're all about so that we can attract more customers like them. So if we have a leaky bucket, for example, people are leaving for a certain reason and they're not happy. Then when we put a new customer in that bucket, it's a customer that is happy with what we actually offer so they won't leave us. So it's more about attracting people that are better suited or better fit for your business or your services and allow you to have more attention based on the profile you're attracting. So your action step is to identify your top customers even if you don't have that many customers. Who are your top two customers, top three customers, top five customers, whatever it might be. Get on a call with them, ask them on email. Can I get on a 10 minute call? I want to learn a little bit more about you, learn a little bit more about what you do, how our product or service helps your business, and just to personally thank you for your business. Most people are psyched to talk to the founder of a business, right? So I found that this was one of the easiest calls to book. It was very easy to reach out to them and they were happy to do it and get, get to know me a little bit. And what we did is we just asked them if we could record the calls so we can transcribe it. And then from there we use the same language that our best customers use to describe their problems or pains and why they love our solution in our sales pages, right? So use the language of the customer to be able to influence and impact our new customers. Number four, secure longer contracts with annual plans. One of the things that we did is we would run webinars to sell our product, Webinar Ninja. We would run a webinar every week, sometimes we did every two weeks and had just a larger webinar with a lot of customers. And on those webinars we taught, we demoed the product, but then we made an offer at the end to buy Webinar Ninja. Now I've invested a lot of time and effort and I've given a lot of value, which means I got a lot of trusts between us, right? I built a lot of trust with that audience. So when I'm making this offer, I made offers for annual plans, not monthly plans, because they can buy the monthly plan anytime. But I made a special packaged offer for annual plans that came with some really cool bonuses that they can't get outside of this webinar. And it really impacted our sales. But most of all, it impacted our retention. Why? Because when people buy on a monthly plan, they are deciding if they should buy every single month. Because every time they get billed, they see that on their credit card, they see that invoice or receipt coming in through the inbox, they're reminded of the sale and the decision they made, and they're starting to second guess, or they may second guess, do I actually need this product? Do I actually use it? And of course you want people using your product or service, but you don't want people to keep making that buying decision month over month. When you get people to sign up on annual plans, they're making the buying decision once a year, which is a lot easier to keep that customer. So, for example, if I'm asking my customer to reaffirm their purchase four times, right? That's the difference between keeping a customer for four months or four years, right? Which is 48 months. So think about that for a moment. That's an exponential return on revenue and retention. So I like to promote my annual plans, especially when I'm doing special deals. If, you know, thinking about doing a Black Friday deal or doing some sort of Christmas deal or New Year's deal, the point here is push your annual plans because they're going to help your retention. So that's an action step for you. Think about your next promotion. Think about even just sending out an email to your list and say, hey, if you're on a monthly plan right now, to your current customers even, right, if you're on a monthly plan right now and you upgrade to annual, here's a bonus or here's a special deal. And you'll find that many people love a good deal and will upgrade, especially if they're happy with your product or service. So definitely offer something special for an annual deal. It's going to be worth it because they're going to be staying for on for longer just by the fact that they're on an annual contract versus a monthly one. So to wrap up today's episode, to answer Fabian's question, reducing Churn and keeping your attention high isn't about waving some magic wand and voila, everything's great. It's about understanding your customers. It's about acting on their feedback. It's about creating the strategies you need to keep them engaged. Right? And start knowing them more than just the numbers. Understanding what makes them tick, understanding who they are as a person, what they like, what they don't like, what problems they have, what keeps them up at night, what worries them so that you can solve more of those problems and earn more money. Right? It's about attracting the right customers. It's about getting the right people into your customer base that actually value what you offer. Right? More of the best customers that you have. And it's about securing them for a longer period of time with things like annual contracts or two year contracts. Whatever you can offer, the longer the better. But the point here is that you want more stability for your business and for your revenue. Thanks for tuning into the Hundred RBA show. I hope you found this episode valuable and you're ready to start implementing what I just taught you today. Business is not about ideas, it's about implementation. All right? It's about taking an idea that you learned and implementing it as soon as possible so you can see the reaction. Right? You could see the result of that implementation and improve and iterate and start getting some roi. Start getting a return on investment of your time and information that you just consumed. Okay? So I'm counting on you to implement. Every time you watch one of my lessons or listen to one of my lessons, I'm counting on you to implement. So you come back for more and implement some more. Thanks so much for listening. If you want more episodes, more resources, just head on over to 100- MBA. Net link is in the description if you're watching YouTube so go ahead and check it over there. I'm Omar Zinhom and thank you so much. I'll see you on the next episode.
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